Here's an interesting article ~ excerpts:
July 1993
It's (Not) the Economy, Stupid
Bill Clinton was elected on an untenable premise: that it is the job of the President to manage the economy. Yes, that is what we have come to expect of Presidents; but this expectation, the author argues, is punishingly at variance with anything any President can credibly deliver
by Charles R. Morris
As all the world knows, "the economy" was the overriding issue in the 1992 presidential election. President George Bush "mishandled" the economy. He lost. Bill Clinton promised to handle it more skillfully. He won. I will argue that he won on a false issue, and that the main criterion on which our presidential elections have come to be decided--managing the economy--is a sham.
The assumption that the President manages the economy is the core of prevailing political wisdom, dinned into the public mind by a generation of pundits, a convention of discourse endlessly repeated but rarely examined. The fact is, presidential elections have become referenda on the business cycle, whose fortuitous turnings are personified in the President--thus the "Bush recession" yields to the "Clinton recovery." This is not economics, it is anthropology--an exercise in collective magic. Presidents are properly accountable for their executive and legislative performance, and there is no question that federal actions can affect the economy, sometimes profoundly. Eliminating the budget deficit in four years, for example, might create a nasty recession or a runaway boom--economists, as always, disagree. But the effects would almost certainly be substantial, however unpredictable. Modern political campaigns, however, are fought on the premise that Presidents can manage the economy, that they can take detailed actions that have a precise result--such as raising productivity, reducing unemployment, or increasing investment. In that sense, how much control do Presidents really have over the economy? The answer is, Very, very little.
Mind Over Matter
The "economy" itself is really just a metaphor for the enormously complex stew of daily personal and commercial transactions among some 250 million Americans. The deceptively precise numbers that purport to measure "savings" or "growth" or "income" are crude approximations compounded from a slag heap of samples, surveys, estimates, interpolations, seasonal adjustments, and plain guesses. It takes months, even years, for economists to sort through the numbers and figure out what really happened--if they ever do. There is still no consensus on what caused the Great Depression. The most recent returns on the U.S. economy show signs of respectable growth. But economists are arguing fiercely over whether it is too little or too much, the morning lark of a solid long term recovery or just a dead-cat bounce. And, of course, they disagree even more fiercely on the policy prescriptions that flow from their prejudices: "Do something or things will get worse!" Or, "IF you do something, things will get worse!"
Clinton's ill-fated economic-stimulus program exemplifies the confusion. Certainly it was small: at $16 billion, hardly more than the rounding error in the national accounts. And no one could argue with a straight face that a porridge of new playgrounds, vaccination programs, and Headstart dollars would visibly improve the economy. But while the Nobel laureate economists James Tobin and Robert Solow warned that the stimulus was too small, Wall Street worried that the President would spook the bond market. If bondholders decided that the economy was growing too fast, or the government was borrowing too much, and inflation was heading up, interest rates would rise and undercut the recovery--the last thing Clinton wanted.
At one point Secretary of Labor Robert Reich, a key designer of the Clinton economic strategy, argued that the "psychological impact" of the stimulus program was what really counted. The emphasis on changing people's minds about the economy sounded a little like official explanations of American policy in Vietnam--bombing just enough to discourage the enemy. The resemblance, in fact, is no accident, for both the image of the President as button-pusher in the economic engine room and the heavily psychologized tactics in Vietnam are squarely in a peculiarly American tradition of thinking about society and the economy.
Pulling Levers
Pan the camera back almost a hundred years: there stands an aging Henry Adams, the historian and descendant of Presidents, agape before a giant electrical dynamo at the Great Paris Exposition of 1900, ready to fall on his knees, "bewildered and helpless, as in the fourth century, a priest of Isis before the Cross of Christ." Transported by this Damascene vision, Adams set out to construct a "dynamic theory of history," seeking the fundamental laws, like those of electricity or magnetism or the kinetic theory of gases, that govern the affairs of men.
Adams's search for a scientific history was tempered by self-mocking irony. But to minds less steeped in the past, America's leap into the Machine Age and the mighty transformations of American social and industrial relations opened entirely new intellectual vistas. The new "scientific" outlook was thoroughly positivist (nothing existed, or at least was worth talking about, if it could not be measured); it was atomistic (all things were condensed from identical particles); and it was statistical (the intricate but predictable dance of countless freely
colliding molecules of gas was choreographed by a few simple, immutable laws). In a series of easy stages the same logic was applied to virtually the entire field of human endeavor.
To begin with, the mapping from a mechanistic physics to the burgeoning science of economics seemed entirely natural, precise, and complete: correct prices, for instance, arose from the statistical interaction of countless atomized market participants obeying the simple canons of rational self-interest. Around the turn of the century American universities developed a defense of American liberal capitalism as the regime most consistent with a scientific outlook, and the economist's style of thinking rapidly colonized the rest of the social sciences. Franklin Giddings, at Columbia; Edward A. Ross, at the University of Wisconsin; and Charles Horton Cooley, at the University of Michigan, pushed the still-nascent study of sociology toward statistics and measurement. (Ross and Cooley started their careers as economists.) The program of the American Sociological Society, organized in 1905, was entirely "scientific," seeking the basic forces, or "sympathy," that bound society together, trying to discover a praxis of "social control" for a liberal society, teasing out the rules of the "social equilibrating-apparatus." By the 1920s all of political science was being recast into a study of the market behavior of utility-maximizing individuals. The same behaviorist faith inspired John Dewey's confidence that schools could be organized like "great factories," to turn out self reliant citizens who would people Dewey's vision of a liberal democracy.
After a period of eclipse during the Depression, the scientific pretensions of American economics and its sister social studies were powerfully reinforced by the sweeping triumph of Keynesianism. Ignoring Keynes's own warnings about the waywardness of real markets, American academics forged a rigidly mechanistic vision of the economic apparatus: pull this lever and investment rises, turn this flywheel and consumption goes up--all the pieces clicking smoothly into place like stainless-steel tumblers. Faith in a deus in machina prompted John Kennedy's wildly unprescient declaration in 1962 that there were no ideological issues left to solve; the country faced only "technical problems...administrative problems."
The economist's vision of the rational actor was formalized in John von Neumann and Oskar Morgenstern's Theory of Games and Economic Behavior (1944). Game theory supplied a metaphysics for the arms race, and led Robert McNamara in his will-o'-the-wisp pursuit of a precise equilibrium of "mutual assured destruction" with the Soviets, as if nuclear arms were a problem of tariffs and quotas, like trade. Since rational actors in rational games reach mutually beneficial accommodations through signaling, it was forever a puzzlement to the civilian theorists in the Pentagon that Ho Chi Minh obdurately persisted in misinterpreting their carefully calibrated bombing campaigns.
Even American ethics has become hardly more than a branch of economics. Dewey always struggled, if not very successfully, against the economist's equation of values with mere wants, although it seemed an obvious implication of his pragmatist teachings. There is no such struggle in John Rawls's A Theory of Justice, the most discussed ethical work of the past generation. Rawls proceeds by constructing a system of goods-maximizing choices by highly rational atomized individuals who lack any history or social ties. The same economistic bias also explains much of the American obsession with personal rights and legalistic procedure: if all wants are theoretically equal, there is nothing left for moralists to do but tinker with process. Economists, after all, care only that the corn auction works; whatever price emerges will ipso facto be the right one.
The interventionist bias of the early Keynesians has created a leftish aura around the more "scientific" social theories. But the same empiricist, atomistic view of society, the insistence on equating choices with values, is a major theme of American conservatism, from Milton Friedman's willingness to legalize drugs to the current "school choice" movement. Thomas Sowell and Robert Nozick take issue with Rawls using exactly the same microeconomic tools that Rawls uses--they just wind up with diametrically different results. The philosophic differences between the left and the right in America, that is, most often reduce to a barren instrumentalism: Should government pull the levers, or do the levers move themselves?
The reach and power of the economic paradigm in America is impressive enough; but what makes it all the more remarkable is that there is almost no compelling reason to believe that it works any better in economics than it did in guerrilla warfare, let alone in sociology, politics, or morals.
full article at: theatlantic.com |
